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Budget Decoded For Developers, Customers
For the developers, the budget proposes relaxation of tax deduction of affordable housing projects
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For developers, home buyers and property owners, the Budget 2017-18 has brought in a slew of exemptions, deductions and incentives. For the developers, the budget proposes relaxation of tax deduction of affordable housing projects. Relaxation has been proposed in the conditions to qualify for 100 per cent profit-linked deduction in the business of developing qualifying affordable housing projects. Going forward, the size of residential unit will be measured as “carpet area” and not as “built-up area,”
Completion of project for claiming deduction will be increased from three years to five years from receipt of approval, and size restriction of 30 square metres (323 square feet) for residential units shall apply only to metro cities (i.e. municipal limits of Chennai, Delhi, Kolkata and Mumbai). The definition of caprter area will be taken as per the Real Estate (Regulation and Development) Act, 2016.
Capital gains exemption has been proposed to be extended to specific capital assets transferred by Individuals/ Hindu Undivided Families under the Andhra Pradesh Capital City Land Pooling Scheme (Formulation and Implementation) Rules, 2015.
The budget has also brought in clarification on taxability of joint development agreements (JDA) in cases in which consideration to the property owner is in the form of share in the project. With a view to minimise hardships faced by property owners, it has been proposed to introduce provisions in relation to the taxability of capital gains on the execution of JDAs by the owners of immovable properties.
It has been proposed that capital gains should be chargeable to tax in the year in which the completion certificate for the (whole or part of the) project is issued by the competent authority. If the share in the project is sold prior to receipt of the completion certificate, the capital gains should be taxable in the year of actual transfer of the share in property.
With a view to provide breathing time to real-estate developers for liquidating their inventory, it is proposed that the annual value of building and land appurtenant thereto shall be considered to be nil (i.e. no notional income under the head income from house property) if the building and land appurtenant thereto is held as stock-in-trade, and the building and land appurtenant thereto is not let out during the whole (or any part) of the year.
The above benefit should be available for a period up to one year from the end of the financial year in which the construction completion certificate is obtained from the relevant authority. Loss from house property up to 0.2 million will be set-off against the income under other heads in the same financial year. Loss above o.2 million is eligible to be carried forward for a period of eight years and can be set-off against income from house property only.
Long-term capital asset
The holding period in respect of immovable properties to qualify as long-term capital asset has been proposed to be reduced to 24 months from 36 months. The base year for computation of capital gains for old capital assets acquired before 1 April, 1981 has been proposed to move to 1 April, 2001. Now the cost of acquisition of assets acquired before 1 April, 2001 shall be allowed to be taken at fair market value as of 1 April, 2001